Tuesday, March 11, 2014

WASHINGTON—Jeffrey E. Thompson pleaded guilty today to felony charges stemming from a scheme in which he and his companies secretly channeled more than $3.3 million in illegal contributions to at least 28 political candidates and their campaigns, including people running for the offices of president of the United States and mayor of the District of Columbia.

The guilty plea was announced by U.S. Attorney Ronald C. Machen Jr.; Valerie Parlave, Assistant Director in Charge of the FBI’s Washington Field Office; and Richard Weber, Chief of the Internal Revenue Service-Criminal Investigation (IRS-CI).

Thompson, 58, of Washington, D.C., pleaded guilty in the U.S. District Court for the District of Columbia, to two conspiracy charges. One is a federal offense: conspiring to violate federal campaign finance laws and to submit false filings to the Internal Revenue Service. The other is a District of Columbia offense: conspiring to violate District of Columbia campaign finance laws by defrauding the District of Columbia’s Office of Campaign Finance.

The guilty plea calls for Thompson to cooperate fully in an ongoing investigation. The plea is contingent upon the approval of the Honorable Colleen Kollar-Kotelly. A sentencing date has not yet been set.

In his guilty plea, Thompson admitted, among other things, to secretly channeling more than $668,800 to pay for campaign activities for a person identified in court documents as “Mayoral Candidate A,” a candidate in the 2010 mayoral race in the District of Columbia. He also admitted secretly channeling $608,750 to pay for efforts on behalf of a candidate in the 2008 presidential primary. In addition, he admitted secretly supporting others through illegal corporate contributions, excessive and unreported contributions, and conduit contributions.

*** “Election after election, Jeff Thompson huddled behind closed doors with corrupt candidates, political operatives, and businessmen, devising schemes to funnel millions of dollars of corporate money into local and federal elections,” said U.S. Attorney Machen. “Today’s guilty plea pulls back the curtain on years of widespread corruption. With Mr. Thompson’s cooperation, we have the opportunity to hold many wrongdoers accountable and to usher in a new era of honesty, integrity, and transparency in D.C. politics.”

“Today, Mr. Thompson took responsibility for organizing a lengthy conspiracy that illegally channeled more than $3 million into federal and local campaigns dating back to the 2006 election cycle,” said Assistant Director in Charge Parlave. “The message we are sending today is clear. While the temptation to undermine the election process may be strong, you will not get away with it. Together with our law enforcement partners, the FBI will be unwavering in combating corruption in the District of Columbia.”

“Jeffrey Thompson engaged in behavior that blatantly ignored and directly circumvented clearly established campaign financing laws, but his egregious behavior did not stop there. Thompson then directed TCBA, a company under his control, to file false corporate income tax returns and submit false documents to the IRS to cover his misdeeds” said IRS-CI Chief Weber. “Today’s actions involving Mr. Thompson serve as a strong reminder of the commitment of IRS Criminal Investigation and our law enforcement partners to aggressively pursue those attempting to undermine the public’s trust.”

“Jeffrey Thompson engaged in behavior that blatantly ignored and directly circumvented clearly established campaign financing laws, but his egregious behavior did not stop there. Thompson then directed TCBA, a company under his control, to file false corporate income tax returns and submit false documents to the IRS to cover his misdeeds” said IRS-CI Chief Weber. “Today’s actions involving Mr. Thompson serve as a strong reminder of the commitment of IRS Criminal Investigation and our law enforcement partners to aggressively pursue those attempting to undermine the public’s trust.”

*** Thompson is the former chairman, chief executive officer, and majority owner of Thompson, Cobb, Bazilio and Associates (TCBA), a corporation that provided accounting, management, consulting, and tax services. He also is the former chairman, chief executive officer, and owner of D.C. Healthcare Systems, Inc. (DCHSI), an investment holding and for-profit corporation. In his guilty plea today, he admitted using funds from those corporations to secretly finance campaign contributions and activities from at least 2006 until 2012.

TCBA received millions of dollars under contracts with District of Columbia and federal government entities. DCHSI owned D.C. Chartered Health Plan, Inc. (Chartered), a corporation that contracted with the District of Columbia government to provide managed care services to a substantial number of District of Columbia residents. Chartered’s contract with the District of Columbia, paid primarily by the federal government, totaled about $300 million each year.

Five others have pleaded guilty since 2012 to charges involving Thompson’s illegal spending. Two others have pleaded guilty in a related investigation involving the 2010 mayoral election.

If accepted by the court, Thompson’s plea calls for a sentence of up to 18 months in prison on the federal offense and a sentence of up to six months of incarceration for the District of Columbia offense. If the government determines at the time of sentencing that Thompson has complied with his obligations under the plea agreement, the U.S. Attorney’s Office will request that the court dismiss the federal charge, leaving Thompson subject to up to six months in prison on the District of Columbia offense, to be followed by up to three years of supervised release.

*** According to a statement of offense signed by the government as well as the defendant, Thompson and others carried out a scheme to use TCBA and DCHSI to disburse excessive and unreported contributions to pay for campaign services and campaign materials in coordination with and in support of political candidates, such as get-out-the-vote efforts. The nature of these coordinated, or in-kind, contributions, also known as “shadow campaigns,” took several forms, including the distribution and dissemination of campaign materials in support of political candidates and their campaign committees.

Additionally, Thompson solicited individuals, including relatives, friends, employees, independent contractors, and the senior management of TCBA, to make conduit contributions in their names and the names of their relatives to campaign committees for federal and District of Columbia candidates, as well as a political action committee. He assured these individuals that he would arrange to pay for and otherwise reimburse the contributions. Thompson used personal and corporate money to advance funds and reimburse individuals for the political contributions that they made in their names and the names of their relatives.

In some cases, he authorized and directed TCBA to make payments variously designated as salary, bonus payments, advances on bonuses, and consultant fees, all designed to disguise the fact that the funds were actually reimbursements for contributions.

According to the statement of offense, Thompson and others took actions that caused TCBA to file false corporate income tax returns and submit false documents to the IRS. Thompson and a TCBA controller caused TCBA to wrongfully deduct TCBA’s reimbursements to conduit contributors on tax returns for the years 2007 through 2010. Also, he and two TCBA officers knowingly executed false promissory notes to conceal TCBA’s activities, and caused the false documents to be submitted to the IRS during an audit of the company.

*** District of Columbia Campaigns: More Than $2.29 Million

According to the statement of offense, from 2006 until 2011, Thompson secretly provided more than $1.3 million for the off-the-books, or “shadow campaigns,” on behalf of seven candidates seeking office in the District of Columbia. He also secretly spent more than $130,000 for a voter registration drive on behalf of one candidate and agreed to pay another candidate $200,000—along with other benefits—to withdraw from the 2006 mayoral race.

The largest such shadow campaign financed “Mayoral Candidate A” in the 2010 mayoral election. During the primary election cycle for mayor of the District of Columbia, from May 2010 through September 2010, Thompson used TCBA and DCHSI to funnel over $668,800 to pay for campaign services and materials in support of a shadow campaign for “Mayoral Candidate A,” who was challenging the incumbent mayor.

Most of this money went for a get-out-the-vote effort for the primary. For example, using funds provided by Thompson and in consultation with a volunteer advisor for the candidate, individuals were paid to manage field operations and transportation related to the shadow campaign. Among other things, these individuals worked directly with, shared canvassing information with, shared workspace with, and coordinated operations with employees and agents of the official campaign for “Mayoral Candidate A,” including those managing get-out-the-vote efforts.

The money also paid for expenses such as the hiring of the candidate’s official campaign driver; the leasing of a luxury sport utility vehicle to take the candidate to campaign-related and other events; and the purchase of posters, yard signs, T-shirts, and other campaign materials.

In addition to the 2010 mayoral race, the statement of offense says that Thompson funded shadow campaigns for candidates running in the 2006 mayoral election; the 2007 special election for the Ward 4 seat on the Council of the District of Columbia; the 2008 election for an At-Large seat on the D.C. Council; the 2010 elections for Ward 1 and Ward 6 of the D.C. Council, and the 2011 special election for an at-large seat on the D.C. Council.

According to the statement of offense, Thompson secretly spent about $278,000 for a shadow campaign for a person described as “Mayoral Candidate B,” a candidate in the 2006 mayoral primary. In that same race, according to the statement of offense, Thompson agreed to pay a competing candidate $200,000 to drop out and endorse “Mayoral Candidate B.” Thompson also entered into a $150,000 consulting agreement with the competing candidate on behalf of TCBA.

Also, between 2006 and 2011, Thompson utilized at least 75 conduits to make contributions to at least 15 mayoral and D.C. Council candidates in excess of $500,000.

*** Federal Campaigns: More Than $1 Million

From February 2008 through May 2008, according to the statement of offense, Thompson used TCBA and DCHSI to funnel about $608,750 to fund a shadow campaign for a candidate running for president of the United States.

The money was used for, among other things, the hiring of a marketing services company, as well as for street teams and canvassers who supplemented the campaign’s official activities in Texas, Pennsylvania, Indiana, North Carolina, and Puerto Rico.

The services included assembling and organizing paid street teams and canvassers to disseminate and distribute campaign materials prepared by the presidential campaign, including posters, lawn signs, pamphlets and stickers. The agreed-upon goal of these efforts was to raise the campaign’s visibility during the 2008 presidential primary election cycle.

Thompson also secretly provided $50,000 to help a civic organization pay for a lawsuit in Texas challenging the two-step voting process in that state, in which voters were allowed to vote twice, once in a primary and once in a caucus. He also provided $150,000 for a political demonstration organized by the civic organization in Washington, D.C. The funds for the lawsuit and the demonstration were to assist the campaign of the preferred presidential candidate.

However, there is no indication that the presidential candidate was personally aware of Thompson’s illicit activities.

Also, between 2006 and 2012, Thompson utilized at least 32 conduits to make contributions to at least 13 federal candidates and a political action committee of at least $250,000.

*** In announcing the plea, U.S. Attorney Machen, Assistant Director in Charge Parlave and Chief Weber commended the work of those who investigated the case from the FBI’s Washington Field Office and IRS-CI.

They also expressed appreciation for the work of Assistant U.S. Attorneys Michael K. Atkinson, Loyaan A. Egal, Ellen Chubin Epstein, Lionel André, Jonathan P. Hooks, Ephraim “Fry” Wernick and Ted Radway, of the Fraud and Public Corruption Section of the U.S. Attorney’s Office for the District of Columbia, who are prosecuting the case.

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